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Express delivery company DHL must pay $30 million to a Salt Lake City shipping reseller for failing to give enough notice that it was breaking its contract and ending air and ground operations within the United States.
Unishippers Global Logistics sued DHL in November 2008, claiming the German giant's U.S. unit was required by contract to give 180 days notice before pulling the plug on their long-term business relationship.
A U.S. District Court jury in Utah agreed last week with Unishippers, ordering DHL to pay damages to its former business partner.
"The jury clearly indicated it believed that DHL acted in bad faith and that sharp business practices will not go unpunished," said Lewis Francis, the Salt Lake City attorney who represented Unishippers during the 2½-year legal battle.
DHL spokeswoman Beatrice Garcia declined to discuss the verdict, noting: "We generally don't comment on litigation that is ongoing, but we are planning to appeal this verdict."
The case dates to 2007, when DHL sought to extend the life of its contract with Unishippers. Part of that agreement prevented either company from terminating the contract except for cause, Francis said.
Unishippers agreed to a contract extension that year. It also agreed in October 2008 to an amendment that allowed DHL to terminate without cause if it gave Unishippers 180 days notice.
Francis said Unishippers agreed to the amendment in return for the right to seek a secondary carrier for its franchises, whose pick-up-and-delivery services were struggling because DHL had begun to shrink DHL Express (USA). The U.S. business unit hadn't made a profit since DHL bought it in 2003 to compete with FedEx and UPS.
Instead of abiding by the amendment, Francis said, DHL announced suddenly, in November 2008, that it was shutting down its U.S. operations. Unishippers immediately sued.
DHL "knew the announcement date when they signed the agreement," Francis said.
The damage award reflects the severity of the harm DHL caused, said Unishippers President Kevin Lathrop.
Unishippers lost almost 60 percent of its overnight express and small-package business between mid-2008 and early 2009, Lathrop said.
The verdict handed down last Friday isn't the first such suit DHL has lost. In June, attorneys for Dallas-based Worldwide Express Operations won a $7.1 million verdict against the company.
In that suit, DHL Express was charged with deliberately misleading Worldwide Express and its franchisees about DHL's plans to discontinue domestic shipping operations. DHL announced plans to abandon U.S. shipping operations less than four weeks after amending its contract with Worldwide Express.
Evidence in the case included a December 2007 memo about reseller customers such as Worldwide Express, where a DHL vice president told fellow executives that "any major change in our offering destroys (the reseller's) entire business model."
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What is Unishippers?
R Unishippers Global Logistics resells shipping and freight services of companies such as UPS to customers through 273 franchisees in the United States.